The life of a DA broker can be quite isolating if the broker does not take adequate steps to avoid this – attending road shows for example – and this isolation is often most acutely felt when it comes to new regulation and rules.
While the debate of directly authorised versus appointed representative may have solid arguments on both sides, when it comes to compliance I believe ARs may be reaping the benefits.
Networks are big on compliance and, in order to ensure they can offer their members the best assistance in adhering to the Financial Conduct Authority’s standards, it is essential that they are up to speed with any developments. Understandably then networks are pretty clued up on FCA regulation.
This will be particularly beneficial for brokers in the case of regulation of the consumer credit/second charge industry. Since the FCA took control of the sector back in April 2014 brokers have been given a lot of mixed messages and confusing advice about what they should do.
Information has not been forthcoming, at least not in the early days and for those sole traders without the support of a network to help them make sense of the rules, there is a risk of falling foul of the regulator.
My worry is that, because DAs are not used to selling secured loans as part of their core offering, they may be unaware of how they should be comparing and referring such products. They may not fully understand where their responsibility begins and ends and the importance of the documentation process in supporting this. As a result they leave themselves open to complaints and perhaps even mortgage misselling claims.
I fully understand the appeal of being directly authorised. The freedom it affords brokers is certainly attractive. However, if you choose to take this route it is imperative that you ensure you take responsibility for your own compliance. Make use of the information that is available, try the regulator’s website as a starting point. Partner with a secured loan master broker that can help you get to grips with the market and has your interests at the heart of its offering. You should be able to see and feel a more compliant process than existed in the past with clear communication of responsibilities to you and your client, detailed research records and guidance to help you stay on track.
Both now and next March, when the Mortgage Credit Directive comes into play choose your loan partner wisely. Make use of their systems – the technology is there to help you. You should be able to lean on your master broker for compliance support. I recommend you lean hard and see if they fall over. It’s better to know now.
The FCA will not allow for mistakes on the basis of being uneducated. It is your duty to educate yourself and have appropriate controls in place. None of this is difficult for a DA so don’t leave it too late. As we all know, when it comes to breaking the rules, ignorance is no defence.